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Five9 CEO: Cloud Contact Center Adoption Is Just Getting Started

By Daniel Sparks - Mar 7, 2020 at 9:15AM

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This $4.4 billion company has a big runway ahead of it.

The coronavirus outbreak's impact on supply chains, travel, and consumer-spending habits has likely prompted many investors to reevaluate the resiliency of the business models in their portfolios for times like these. One company that arguably stands out as a winning bet if workforces adopt more virtualization and reduce investment in face-to-face customer service is Five9 (FIVN -2.48%), a business that offers contact-center software and off-premise, cloud-based, scalable contact-center solutions.

Of course, Five9 is already growing rapidly and isn't reliant on any uptick in business model virtualization as a result of coronavirus fears. Revenue jumped 28% year over year in Q4, in line with 28% growth in Q3 and an acceleration from 27% growth in Q2. The company's top and bottom lines for the period both crushed analysts' estimates.

To get a better understanding of the drivers behind Five9's business and the opportunities ahead, The Motley Fool interviewed Five9 CEO Rowan Trollope following the tech company's recent earnings report. Here are some of the takeaways from the interview.

A diagram showing three laptops connected to a cloud

Image source: Getty Images.

Early innings

Five9's $328 million in 2019 revenue, which was up from $258 million in 2018, may be just the tip of the iceberg if Trollope is right about his beat on the market opportunity. These are still the "early days of cloud contact-center adoption," he said.

Trollope continued:

Over 85% of companies are still using contact-center solutions that rely on hardware that resides on-premise in their company's data center. We are already seeing the pace of cloud migration accelerate as more executives come to understand the benefits of moving their contact center to the cloud, and how it can provide the agility they need to stay competitive, and differentiated customer experiences today's consumer demands.

To highlight the momentum in demand for cloud contact centers, Trollope pointed out that it had 59 customers in Q4 generating more than $1 million in annualized, recurring revenue. This is up from 40 customers in the fourth quarter of 2018. Looking ahead, the CEO said he expects the company will continue its trend of growing enterprise subscriptions at rates that exceed 30%.

Two key secular tailwinds

Trollope pointed to two primary secular tailwinds for its business: the ongoing shift in organizations to cloud-based solutions and the increasing importance of customer service.

Customer service is more critical to business success than ever, "driven in part by today's younger generations, who have increasingly high expectations when it comes to customer service," explained Trollope. These changing landscapes for businesses will serve as key drivers for cloud contact-center adoption "for years to come," Trollope said.

What's next?

In 2020, Five9 said it will invest in product innovation, international growth, and channel development.

Some specific areas Five9 is looking forward to include:

  • The upcoming launch of its artificial intelligence (AI)-based agent-assist product, which helps automate agent tasks in real time.
  • Easier transitions to the cloud for its customers, thanks to its recent acquisition of Whendu's integration platform as a service (iPaaS) offering for contact centers.
  • Building on its international markets, where revenue rose 45% year over year in 2019.
  • A greater addressable market when Five9 closes its pending acquisition of Virtual Observer, which provides workforce optimization solutions.

Indeed, 2020 looks promising for Five9. With so many drivers and opportunities, it wasn't surprising to see the company provide guidance for more strong growth in 2020. For the full year, management expects revenue to jump about 16% to between $380.5 million and $383.5 million. Further Five9 expects its non-GAAP (adjusted) earnings per share to increase from $0.82 in 2019 to between $0.83 and $0.87, even as the company invests aggressively in growth opportunities.

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